First Quantum: focus on improvements resulted in strong production

TORONTO – First Quantum Minerals has reported results for the three months ended September 30, 2022 of net earnings of the Company of $113 million and adjusted earnings of $96 million.

“It is pleasing to see that the focus on operational improvements has resulted in strong production from Cobre Panama and Sentinel in the quarter. However, the headwinds from recessionary concerns and broad cost inflation have led to substantial margin compression across the industry. In the longer term, we continue to see structural upside in our markets from the ongoing challenges of bringing on new copper supply. We are well positioned to navigate the current period of challenging macroeconomic conditions,” commented Chief Executive Officer, Tristan Pascall. “We remain focused on driving productivity and cost improvements at our operations, managing capital expenditures prudently, and exercising financial discipline.”

During the third quarter, First Quantum made an important step towards achieving the Company’s target of reducing its greenhouse gas emissions by 50% by 2030. On September 16, 2022, the Company signed a long-term renewable power contract for the CP100 Expansion project at Cobre Panama, which shifts the total energy mix at the mine to approximately 20% renewable by the end of 2023.

Q3 2022 SUMMARY

In Q3 2022, First Quantum reported gross profit of $302 million, EBITDA¹ of $583 million, net earnings attributable to shareholders of $0.16 per share, and adjusted earnings of $0.14 per share². Relative to the second quarter of this year (“Q2 2022”), third quarter financial results were impacted by margin compression as a result of a declining copper price and cost inflation. This was partially mitigated by higher copper sales volumes.

Total copper production for the third quarter was 194,974 tonnes, an increase of 2,306 tonnes from Q2 2022. The quarterly increase in production was mainly attributable to Sentinel, which achieved record throughput levels and accessed higher-grade ore. Total copper production guidance for 2022 has been lowered from 790,000 – 855,000 tonnes to 755,000 – 785,000 tonnes, mainly attributable to the lower production at Kansanshi.

Copper C1 cash cost of $1.82 per lb for Q3 2022 was $0.08 per lb higher than Q2 2022 as inflationary pressures on key consumables continued to impact costs. Copper C1 cash cost² guidance for 2022 has increased from $1.45 – $1.60 per lb to $1.70 – $1.80 per lb as a result of lower production from the Zambian operations and broad cost inflation. 2022 copper AISC² cost guidance has increased from $2.15 – $2.30 per lb to $2.35 – $2.45 per lb. Market rates for fuel, sulphur, explosives and freight had reduced by the end of the third quarter, but there is a lag before such market changes flow through to unit costs.

Q3 2022 OPERATIONAL HIGHLIGHTS

Total copper production for Q3 2022 was 194,974 tonnes, up from the 192,668 tonnes in Q2 2022 as Sentinel achieved strong production, while production at Kansanshi was impacted by lower grades and recoveries during the quarter. Cobre Panama’s strong operational performance in Q2 2022 continued into the third quarter. Copper sales volumes in Q3 2022 totaled 198,980 tonnes, approximately 4,000 tonnes higher than production, as various logistical and shipping challenges that prevailed during previous quarters eased in the third quarter.

Copper C1 cash cost averaged $1.82 per lb in Q3 2022, up from $1.74 per lb in Q2 2022 as a result of broad cost inflation that was partially mitigated by an improvement in production volumes. Copper AISC cost averaged $2.34 per lb in Q3 2022, down from $2.37 per lb in Q2 2022.

• At Cobre Panama, record mill throughput of 22.4 million tonnes of ore with an average head grade of 0.46% was processed during the third quarter, resulting in record quarterly production of 91,671 tonnes of copper. The operation continues to benefit from improvements in blasting to improve fragmentation, along with improving mill availabilities and sustained increases in secondary and pebble crushing. Copper C1 cash cost¹ of $1.43 per lb was down $0.11 per lb from the previous quarter, principally driven by improved production volumes. Copper production guidance for 2022 has been narrowed from 330,000 – 360,000 tonnes to 340,000 – 350,000 tonnes. Full year 2022 grades and recoveries are expected to be broadly consistent with 2021.
• Kansanshi produced 29,862 tonnes of copper during the third quarter, 25% lower than Q2 2022 due to lower grades across all three circuits and the resulting impact on recoveries. Access to the M12 cutback was restricted until the end of the third quarter due to accumulation of water in the main pit. As a result, low-grade oxide ore and tarnished sulphide ore from stockpiles were processed through the oxide and mixed circuits, respectively. Dewatering of the M12 area has been completed and planned mining activities resumed toward the end of the third quarter. The decline in the oxide ore grade was due to the depletion of higher-grade areas and sulphide feed grade was impacted by continued feed from narrow-veined regions as a result of the current mine layout and mining sequence. Copper C1 cash cost¹ of $2.93 per lb was 60% higher than the previous quarter, mainly due to lower production and continued high costs for key consumables. 2022 production guidance at Kansanshi has been lowered from 175,000 – 195,000 tonnes to 140,000 – 150,000 tonnes to reflect the challenges year-to-date. Production volumes are expected to continue at lower levels until the completion of the S3 Expansion project.
• Sentinel delivered its best quarterly production of the year with 64,120 tonnes of copper produced, 22% higher than production in Q2 2022. Sentinel reached its target run rate of 62 million tonnes per annum ahead of schedule, allowing the operation to achieve its highest quarterly throughput for the year. Grade improved during the quarter with more consistent higher-grade ore being exposed in the Stage 1 and Stage 2 pits. Copper C1 cash cost¹ of $1.77 per lb was 6% lower than Q2 2022 as higher production more than offset the impact of elevated cost pressures. While grade is expected to continue to improve in the fourth quarter as higher grade ore is exposed, the slower turnover of benches earlier in the year has resulted in a guidance reduction in 2022 from 250,000 – 265,000 tonnes to 240,000 – 250,000 tonnes.
• Ravensthorpe’s nickel production for the third quarter of 2022 was 5,849 contained tonnes, a 21% increase over Q2 2022. HPAL rates improved in the third quarter on the back of improved beneficiation plant availability and stability. Nickel C1 cash cost¹ was $9.12 per lb during the period, a 10% decrease from the previous quarter, as higher production volumes offset higher processing costs of sulphur and fuel. Finished goods at the end of the third quarter totaled 2,576 tonnes due to recent slowing in demand for MHP, predominantly out of China. The 2022 nickel production guidance range has been lowered from 25,000 – 30,000 tonnes to 20,000 – 23,000 tonnes based on lower year-to-date production. Nickel C1 cash cost¹ guidance has been updated from $6.25 – $7.00 per lb to $8.25 – $9.00 per lb.